Domestic furniture brands revise plans to brace IKEA competition

Local players have already begun to get aggressive on their expansion plans even as they believe that IKEA will benefit them by giving a fillip

NEW DELHI: The green signal to Swedish furniture maker IKEA for its 100% single brand venture in India has set domestic furniture makers in a frenzy leading most of them to revisit their business models to gear up for competition.

Local players have already begun to get aggressive on their expansion plans even as they believe that IKEA will benefit them by giving a fillip to the organized furniture segment in India.

Major domestic retailers such as Godrej Interio, Durian and several others are busy charting out plans for increasing brand visibility by adding more stores in the next few years. Besides focusing on product diversification, brands are increasing their marketing budget for greater product awareness.

"A lot of local brands will now roll out revised plans. IKEA is going to make a qualitative statement. The change, however, may be concentrated in the towns where it plans to open its stores," said Mohit Bahl, partner, transaction services at KPMG India.

Godrej & Boyce-owned furniture unit Godrej Interio, which has a greater presence in the mid to premium range, is now working to increase its presence in the premium range for better margins. Premium products contribute less than 5% of its total revenues currently, but company executives say this will increase to over 20% in next five years.

Future Group-owned furniture retail format Home Town is looking to consolidate its business by way of resizing stores and revising store counts to make the format viable, market watchers said. The company, however, was not available for comments.

Furniture maker Durian too is looking for markets in the tier II and tier III towns. With an increasing demand from the aspirational middle class, Durian is trying to move away from focusing only on metros.

International brands existing in India, however, say that fear of IKEA cannibalizing business of smaller players may be unfounded. According to experts, market share of IKEA is still in single digits in markets outside its home country.

Even as IKEA’s lucrative price points might prove to be a challenge, experts say the market is unsaturated enough for various price range products to co-exist.

(This article was originally published in The Times of India)

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